Global Food Prices Seen Declining as Demand Growth Slows

March 15 (Bloomberg) -- World food prices will drop this
year as increases in unemployment in developing and developed
countries slows growth in demand, the United Nations said.

“We have started to see a decline in food prices,” Jose
Graziano da Silva, director general of the UN’s Food and
Agriculture Organization, said at a conference in Hanoi today.

World economic expansion will slow to 3.3 percent this year
from 3.8 percent in 2011, according to the International
Monetary Fund. In China, Premier Wen Jiabao has announced a
growth target of 7.5 percent for this year, down from 8 percent
in the past seven years. Global harvests of wheat and rice, the
world’s two most-consumed food grains, are headed for records as
farmers boost planting to benefit from rising prices.

“We saw acreage up across almost all crops, while we’ve
seen efforts at expanding livestock herds,” adding to food
supply and pushing prices lower, Michael Creed, an agribusiness
economist at National Australia Bank Ltd., said by phone from
Melbourne. The high prices last year certainly produced a
response from farmers, he said.

While global food prices climbed for a second consecutive
month in February on higher costs for cereals, cooking oils and
sugar, they are down 9.5 percent from a record in February 2011.
An FAO index of 55 food items increased 1.2 percent to 215.3
points from 212.8 points in January, the agency said March 8.

Price Volatility

Prices of rice, wheat and corn soared to records in 2008 on
global shortages, prompting export limits by some countries and
spurring concern that a food crisis was looming. Riots occurred
from Haiti to Egypt.

“The FAO Index will be lower” by the end of the year, Da
Silva said. Consumer prices have shown signs of retreating with
inflation in China, the world’s second-largest economy, easing
to the slowest pace in 20 months, data showed this month.

Wheat prices declined 29 percent from their high in
February 2011 and traded at $6.475 a bushel on the Chicago
Board of Trade today. Rice prices tumbled 25 percent from a peak
in September to $13.94 per 100 pounds.

Rice Costs

In Asia-Pacific, food price volatility remains a “threat”
with retail rice costs in many countries 10 percent to 30
percent higher than in 2011, he said. A number of countries are
close to their limit for agricultural expansion, he said. “Land
degradation also affects productivity in Asia and Pacific, a
region that is increasingly threatened by water scarcity.”

The region is home to 62 percent of the world’s 925 million
undernourished people, Da Silva said. Undernourishment fell from
20 percent to 15 percent in the 16 years to 2006-2008, he said.

Global food output must rise 70 percent by 2050 to feed a
world population expected to grow to 9 billion from 7 billion
and as increasingly wealthy consumers in developing economies
eat more meat, according to FAO.